Soaring costs of major transport projects

The UK Department for Transport (DfT) has strong views on its priorities for capital spending, but perhaps less so on value for money and return on investment. We take a look at some recent proposals.

One of the phrases that the DfT repeats as part of its standard response to any suggestions for a change to metric road signs is, “Our position is that we do not consider that diverting funding from high priority areas for the metrication of traffic signs is justified.” However, the recent publicity about the soaring cost estimates of the proposed High Speed 2 rail project (HS2), and proposals for a new airport in the Thames Estuary (“Boris Island” after London mayor Boris Johnson) or on the Isle of Grain (“Foster Island” after architect Lord Foster) involve tens of billions of pounds of public expenditure without apparently diverting funds from “high priority areas”. For such projects, it seems, money is no object.

Compare that to the claim that it is too expensive to change British road signs. Cost is now given as the main reason for postponing the conversion of road traffic signs. Yet cost does not seem to matter for the proponents of HS2 and new airports, despite the tens of billions of pounds of public spending they would require. And the estimates are still rising.

In June 2013, Danny Alexander, Chief Secretary to the Treasury, announced plans for £70 billion of investment in transport, including funding for HS2 (Sources: https://www.gov.uk/government/news/government-prioritises-long-term-investment-in-infrastructure-spending and https://www.gov.uk/government/speeches/speech-by-chief-secretary-to-the-treasury-danny-alexander-investing-in-britains-future). He has allocated £42.6 billion for building HS2 and another £7.5 billion for HS2 rolling stock [at 2011 prices], a total of £50 billion to be spent on HS2 alone. The cost estimate for HS2 has soared by £10 billion, MPs were told, compared to previous DfT estimates. (Source: http://www.guardian.co.uk/uk/2013/jun/26/hs2-costs-escalate-mps-told) Danny Alexander allocated £28 billion in enhancements and maintenance of national and local roads, including £10 billion to repair the national and local road network.

Sir Howard Davies and his colleagues at the Airports Commission have been looking at proposals to deal with the shortage of capacity at Heathrow, which include new airports or new runways at existing airports. The deadline for submissions to the Commission was Friday 19 July 2013 (Source: “Heathrow bosses detail three options for third airport runway”, on-line edition of Independent report published on 17 July 2013, link at http://www.independent.co.uk/news/uk/home-news/heathrow-bosses-detail-three-options-for-third-airport-runway-8713616.html?origin=internalSearch). This report gave the following cost estimates for the seven proposals:

Heathrow North: £14 billion
Heathrow North-West: £17 billion
Heathrow South-West: £18 billion
Total if all three projects were carried out at Heathrow: £49 billion

Gatwick with an additional runway: £10 billion

Stansted with three additional runways: £30 billion

Isle of Grain – “Foster Island”: £50 billion

Thames estuary – “Boris Island”: £80 billion

These proposals are, of course, alternatives.

A recent addition to the list of possible transport projects, not included in Mr Alexander’s June announcement, is Crossrail 2 in London at £12 billion.

Obviously, these figures are proposed costs of transport projects over a number of years. The DfT’s own grossly inflated cost estimate of £0.7 billion for the conversion of road signs to metric units, which would also be spread over several years, is just one per cent of the £70 billion that Danny Alexander proposed to spend on transport. Given the vast sums for major transport projects, it looks ridiculous for the DfT to imply that other projects will be put at risk by the metrication of road signs. Relatively speaking, the metrication of road signs costs pennies in the grand scheme of things.

Furthermore, unlike these mega transport projects, the cost of the conversion of road signs includes an allowance for “optimism bias”, without which it would be below £0.4 billion. Interestingly, this is still greatly in excess of the actual cost per sign of comparable projects in Ireland and elsewhere.

For such a modest investment, all road users will benefit from the use of a single, simple, rational and consistent measurement system but the biggest benefit will go to society as a whole as Britons will no longer need to be familiar with two systems of measurement. It will also benefit tourists and other Europeans, who will not be faced with or compelled to learn an unfamiliar system of measurement, given that the metric system is used around the world. Which other major transport project provides these universal benefits for such a modest investment?

(Note: in this article, we have used the now commonly accepted meaning of ‘billion’ as one thousand million.)

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6 Responses to Soaring costs of major transport projects

  1. BrianAC says:

    Personally I think these high speed rail systems are going to be our biggest white elephant ever; they are nothing more then toys for the idle rich. If anything, what we really need is a good, fast (but not that fast) reliable rail system. To start, join all the London airports with a sensibly efficient and sensibly quick, rail system; this would give us a giant 'London hub' that we may or may not need. Then join likewise the main airports. If we (as a country) cannot run a decent 'standard' service then there is little hope of running a high speed service.
    Railways on their own will not solve any problems. At the end of every railway journey is a road journey, bike journey or a foot journey. With nowhere to park a car, even less a bike, poor roads and even worse footpaths, it is a high speed trip to the next bottleneck. I forget who it was that said "Britain should invest in infrastructure", but I am sure they did not mean a couple of very expensive and pointless projects like these.
    Priorities to me are getting the the simple basics in order. Getting the country on to one system of measurement was the main one 50 years ago, even more so now. Then we could get the schools all teaching the one system correctly, the media all talking the same language. As I get older I am finding it increasingly difficult to understand multiple mixed measurements with which I am bombarded daily. Inches I find irksome, especially as BBC weather seems to have gone back to using them in recent weeks. Stones I have never understood. Miles on roads have always been a problem correlating 1760 yards into tenths of a mile, or 1/3 mile. It was such a problem that caused me a 95 mph accident in 1967, too busy trying to work out what a 1/2 mile was, when in fact it was 1/3 of a mile anyway. Thus I have never thought miles, 1/2 and 1/3 miles judged on a 1/10's odeometer as being very safe. To be honest I don't much like km/h either, to my mind it should be m/s, but that is a different story.

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  2. John Frewen-Lord says:

    This is an excellent and well researched article. What I find disturbing is, for want of a better word, the hypocrisy in how the DfT justifies some expenditures and not others. The DfT talks about value for money and return on investment (all very laudable goals), yet wastes £40 million reimbursing bidders on a FAILED franchise tender for the west coast mainline, due entirely to its own (well reported) incompetence - i.e. the DfT spent all that (taxpayers') money, to end up precisely where they started, and having achieved exactly nothing. And seemingly doesn't blink an eye!

    That amount of money would have paid a substantial proportion of the cost of converting the UK's road signs, using reasonable and rational estimates. Canada did it in the 1970s for an equivalent amount in today's money of under £60 a sign. There are some more expensive speed related signs today in the UK (such as overhead variable limit ones on various roads), as well as speed cameras and the like, all of which will need reprogramming (not hugely expensive, I would have thought), but even so, the total cost is, as this article states, a tiny fraction of the amounts of money the DfT seems well disposed to spend on its favourite programs, all with marginal returns on investment (if at all, whether directly or for the greater good of society).

    ANY expenditure of taxpayers' money has to look at in terms of the greater good - i.e. the return on that expenditure may come from a source not directly related to the actual expenditure. In the case of road signs, the expenditure on conversion will provide a very positive return that can be measured in terms of increased credibility of the UK, leading to enhanced opportunities for our exporters, greater potential for our school children and young adults to compete in a metric world, and small but important benefits to consumers in, for example, car manufacturers not having to produce a special set of instruments purely for the UK. These returns will be many times the initial investment.

    One has to ask why, if the DfT is supposedly so cognisant of returns on investment (as it should be), it can't see all of these things?

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  3. philh says:

    I strongly agree with sentiment expressed in BrianAC's comment above.

    I think that big spectacular projects like HS2 get preferential treatment for just that reason - they are spectacular. Politicians like to claim credit for doing great things that people recognize as such.

    Converting road signs to metric is old hat and just not sexy enough.

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  4. Leo says:

    As much as I'm a major supporter of finally finishing Britain's journey toward the metric system, I'd have to disagree with the general point you are making. The key is the difference between spending and investing.

    The reality is that financing projects at the level of a nation is very different from that of a household. There is no chunk of disposable income that could be spent on either A or B. Where in a household money is mostly spent and not invested, at a country level a lot of money is invested to either make more money or reach an important strategic goal.

    For households borrowing money is in most cases very foolish (with a mortgage being one of the very few exceptions). For a nation borrowing money to invest in for instance infrastructure makes perfect sense if the Benefit to Cost Ratio (BCR) is markedly positive. It means you borrow money to either make more money or prevent having to spend even more money in future.

    With projects such as HS2 or a new airport you can't say that cancelling the project would free up those funds to use on something else. The money for HS2 simply doesn't exist to use on something else because the lenders know all too well that yet another tinkering with the West Coast Main Line is a big money sink with a very poor BCR. The last 10 year long disruption at £10bn upgrade of the WCML that only added 7% of additional capacity was not money well spent, a next round will be even worse. The benefits of HS2 are adding much needed capacity. An increase of 100% instead of 7%.

    Furthermore, and this is crucial, there is a reason all political parties (from Labour who originally drafted the HS2 plan, to the Conservatives who are currently implementing it, the LibDems who strongly support it to UKIP who even proposed three new HS lines in their manifesto) believe in HS2. They do so because, among other things, it helps towards reaching a number of medium and long term strategic goals such as narrowing the North/South divide. Reducing that divide is in the interest of Britain because it help us make better use of available resources. Making better use of labour, knowledge, land etc. helps Britain PLC. and ultimately increases GDP. Politicians can sell that to voters because there are benefits to each party's typical voter. Investing in infrastructure during a recession is textbook economics; it is the cheapest during a downturn, it creates temporary and permanent jobs, helps the recovery and ultimately results in a higher GDP for decades to come.

    It is useless to simply compare the cost of a new airport to the cost of metrication because they are very different beasts. If the metric cause could learn anything from HS2, a new airport or any of those infrastructure projects is that any cost should not be presented with some idealistic argument, ridiculing or showing how far behind Britain is in comparison to the rest of the world (how true they might be if you ask me). It should be presented as a sensible investment that helps Britain PLC. increase its GDP. That is the way to many a politician's heart.

    By framing it this way, further metrication is not "a cost that Britain could ill afford during a downturn", it has become "an investment that benefits Britain for decades to come". It saves costs on a range of things from bridge strikes to cheaper imports and helps British business better compete internationally.

    In short, metrication should be reframed from a cost to an investment to convince the powers that be.

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  5. BrianAC says:

    @ Leo
    Trying to avoid a political debate here, you make a good point.
    Moving quickly on to your last sentence "... In short, metrication should be reframed from a cost to an investment to convince the powers that be. ..."
    You are trying to bring logic back into the discussion, logic is not a word widely understood and is quite simply not working.
    By the DfT own figures they estimated that properly signing low bridges would actually save money within a few years, so they chose not to do so.
    Locally to me we have a lot of 'heavy lorries on country roads' problems causing untold financial losses. The solution should be to put up signs that foreign lorry drivers can understand. What they actually did was to put up signs reading "road unsuitable for heavy lorries" Five times the size and probably five times the cost for specially made signs instead of world standard signs. Now, using logic, what information does that give to a Romanian or Polish lorry driver? I could not even read them myself while driving a car.
    On that same road 'they' have just re-built a bridge over a railway line, completed this year. It has both a width limit and a weight limit, not a standard sign in sight, I forget exactly what it says, but it is in words that these lorry drivers, which should not have got onto the road had it been properly marked, would not understand, something like " weight limit 7t except for buses 12T " Why the bridge has a different weight for buses in not clear. A local road in the last few years was narrowed to keep lorries off, it has a posted width of "6' 6". Roughly translated that is 6 minutes 6 seconds wide, about how long it takes a 44 tonner to get into it.
    Now this is in an area that the pro Imperial lot complain about as being 'difficult' to deal with. Maybe they have got their point across now?
    Why use logic when a bit of artistic licence is more fun? It costs the council / government nothing; it is the tax payers / ratepayers that pay the price.
    Until we have proper, definitive, positive guidance from government making international road signs mandatory and all this other nonsense illegal, instead of the current half in, half out or do-as-you-like syndrome we will continue to pay the price, an ever increasing price.
    People are confused, councils are confused, contractors are confused, retailers are confused, manufacturers are confused. We are all confused as to what we should actually be doing.

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  6. Leo says:

    @BrianAC. Thanks. Yes, I did try to not go into too much detail on HS2 itself (or its politics) as I feel this is not the place to discuss its merits. This is a news and discussion platform about the metric system in the Britain. Obviously HS2 will be entirely built in metric and the advent of ERTMS (used on newer projects such as Thameslink and HS2 among others) in Britain could even mark the start of the metrication of the British railway operation (not construction as that is mostly metric already).

    The reason the cost of HS2, or any other infrastructure investment, has no place here is because it is a logical fallacy to suggest that if the government has money to build a new airport or a new rail line it must have money to finance a project to metricate Britain's roads. That is not true. There is no pot with £30+ billion in it to spend on HS2. This pot of money doesn't exist and will never exist (the closest you'll ever come to it is a HS2 allocation with just under £2 billion in it). Thus, not investing in HS2 doesn't suddenly free up a pot of money to spend on something else, the funds simply disappear because they only ever existed on paper. Similarly, a new estuary airport would mean the closure of Heathrow. The sale and development of over 12 sq. km of land in one of the most expensive parts of Europe would raise billions of pounds. That is taken into account in a decision to invest in a new airport. The benefits of metricating Britain's roads are a lot harder to quantify, that is the cause's challenge.

    I agree with your comment about logic. The sad state of affairs in this country is that shouting ideology nearly always trumps well considered reason or facts. No politician or civil servant will ever hold a passionate speech to metricate Britain's roads, the individual gain for him or her will be minimal while muck-raking politicians and gutter press would have a field day!

    This is why Britain is a largely metric country without many people realising it. Metrication has happened by stealth. Through the Met Office, Ordnance Survey, Government departments, Transport for London, the British Standards Institute, the NHS, the manufacturing industry etc. etc. Britain is a predominantly metric country now. Even the staunchest vocal supporter of hanging on to the Imperial System drives to work in a metric designed car, on metric designed and maintained roads, using petrol sold in metric units to arrive at their office which is likely built to British building standards and thus designed and maintained in metric. Probably mostly unaware to said critic.

    This metrication by stealth has been the ideal way to evade the ideological debate and has helped the metric system gain big inroads into Britain. The downside is that the few remaining pieces which can't be easily done by stealth, such as the roads, are now left. They will need a different approach.

    There are still some options, however. It is foolish to suggest Britain should just switch to metric roads in a coordinated and clearly marked time frame. While that would not be hard or even that expensive to implement (see Ireland), in Britain's political system it is not realistic and likely counter-productive. You need a lot of small steps, chipping away at the Imperial system.

    What could work, although not likely during this government, is allowing (but not mandatory yet!) road signs to be dual system. I don't know if it's a Transport for London thing but most bridges here in London have dual markings. This voluntary system can then in due course be replaced by a mandatory dual system. In due course the Imperial measures could be made optional as a last phase to banning them all together. Yes, that will take time!

    Another relatively easy step is persuading the motoring industry to lobby for replacing the MPG measure for car efficiency with the L/100km system used in the rest of the world (except US). We have started selling petrol in litres, changing MPG to L/100km is the next step. It allows for easier international comparison. It makes more sense from a consumer perspective because it makes calculating how much fuel is need for a particular journey a lot easier. And, it is the measure of the entire car industry outside of the American brands, it is about time that translates into the consumer brochures and dealer forecourts.

    As for a solution to metricate speeds and distances on the motorway, I haven't found it yet.

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